The headline for Ofcom’s ad-campaign, announcing deregulation of BT’s prices, signals the end of an era that began under the ‘RPI minus X’ command of Sir Bryan Carsberg, the first Director General of OFTEL back in 1984.

It’s taken far longer than anyone expected.  Twenty two years on from privatisation, the regulator can now agree that BT’s market power is sufficiently reduced to back off on price controls and allow BT the flexibility it wants as it prepares to dump the PSTN of old and shift to its 21^st Century all-IP network.

During this long journey, business consumers of networked services have witnessed fundamental structural changes in the telecoms industry.  The earliest form of price controls reflected the lack of real market competition or service choices.  New entrants faced massive investment hurdles except in a few ‘cherry-picked’ locations.

It was only with the growth of a significant Indirect market – the legions of resellers, distributors, systems integrators and ISP’s – that alternative service choices (albeit often BT rebadged) became possible.  By 2001 commentators were already describing BT as an increasingly wholesale Telco with a declining retail arm.

But, long before ADSL, the convergence of computing and telephony changed the way that many businesses bought and managed networked services.  Telecoms managers competed with the IT brigade to be Information Services Director and the long-standing TMA was reborn as the Communications Management Association.

For many SME’s the whole business of designing, buying, managing and maintaining their company networks could now be outsourced to these increasingly competent and multi-skilled indirect channel partners.  With sighs of relief we abandoned the effort of explaining bits and bytes to networking novices and telephonic sales people.

The last decade of price controls has, however, also shaped this industry of intermediaries.  As long as BT pricing was stable and predictable, alternative suppliers needed only to marginally undercut the supposed market leader.  Dependencies on margins sufficient to pay commissions and to share revenue on, say, 0845 and 0870 numbers, are now unsafe not only because BT prices are free from regulation but also because Ofcom has intervened to eliminate by 2008 some of these Call Revenue Share options.  

The business models that offset Help Desk costs (and allegedly keep customers waiting) will need a rethink, or a change of number.  Consumers will, perhaps, no longer fume at the robotic recorded voices urging them to “please hold during the silence” but many businesses will need to look elsewhere for micro-payment revenues.

How will this regulatory moment be seen in the context of Next Generation Networks?  The old price structures had become irrelevant as voice revenues decline faster than the growth from new services.  The regulator’s focus is now on managing the NGN transition and a vastly more-complex and inter-dependent telecoms ecosystem.  Sir Bryan Carsberg now sits on BT’s Equality of Access Board to govern its adherence to ‘functional separation’ of their wholesale and retail operations.  Gamekeeper turned new gamekeeper?

As BT prepares to deploy their 21^st Century Network - coming by 2010 to a node near you  (terms and conditions and universal service obligations may, or may not, apply) - these next 4 years will confirm that Ofcom has, at last, made the right call.

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First published in Communications News, September 2006